After a major rally founded more on expectations of change than actual change, we are cautious on some charts in Brazil.
Brazil suddenly has the eyes of global investors, let alone EM investors.
The Bovespa Index is the flagship index of the Brazilian stock exchange, known by its acronym, BM&FBOVESPA. The index includes 68 of the 370 companies listed on the exchange, which represent roughly 70% of the exchange’s total capitalization and 80% of its trades. The Bovespa is calculated in reference to prices on February 1, 1968.
Massive growth in the need for financial services in emerging markets has demanded financial competitors to adapt and innovate. This has provided tremendous opportunity for fast-acting companies to benefit.
Brazilian banks like Banco Bradesco (BBD, quote), which dropped 5.8% on Monday and extended losses on Tuesday after it reported second quarter earnings, are getting hammered. Earnings were basically flat as increases in loans and financial services revenue were offset by a higher expense in loss provisions.
Overnight markets in Asia took a beating across the board on escalated fears the emerging market of Greece will not be able to pay off its debt. There are growing concerns the euro zone will be forced to cut Greece loose or approve some kind of debt forgiveness, wiping out money owed for the bailout.
China’s manufacturing data recovered somewhat in July, climbing to a five-month high of 49.5 compared to 48.2 for the previous reading in June and giving nervous emerging markets a bit of confidence that not everything in the global economy is bad.